Seoul: South Korea will maintain most elements of the proposed tax code revision but has decided to scrap plans to lower the basic deduction for single-home owners who do not reside in their homes. The finance ministry announced this decision on Tuesday following significant controversy surrounding the proposal.

According to Yonhap News Agency, the Ministry of Finance and Economy stated that the revision package was finalized at a Cabinet meeting held earlier in the day. This package primarily focuses on imposing heavier tax burdens on owners of high-end homes. Last month, the government suggested reducing the basic deduction under the comprehensive real estate holding tax from 1.2 billion won (US$873,000) to 900 million won for single-home owners who do not live in their homes. However, after considerable debate, the government chose to retain the deduction at its current level.

The government will, however, increase the basic deduction from 1.2 billion won to 1.4 billion won in assessed value for single-home owners who occupy their homes. This decision underscores the government's emphasis on owner occupancy, which they argue could help curb speculative trading in the housing market when homes are rented out instead of being occupied by their owners.

Critics of the proposed reduction have argued that it could result in an excessive tax burden, especially due to the prevalence of the jeonse lease system in South Korea. The system involves tenants providing landlords with a large lump-sum deposit, which is returned in full at the end of a lease usually lasting at least two years. This decades-old system allows buyers to acquire homes using only the "gap" between the purchase price and the jeonse deposit, making such purchases particularly appealing during housing market booms. Landlords can secure new tenants to repay deposits to outgoing tenants while home prices continue to climb.